What a difference a year makes. The crypto scene changes fast. Blockchain technology came into 2018 riding the widespread perception that it was about to disrupt the world's financial system and achieve mainstream adoption. It heads into 2019 with much lower expectations.
What happened in 2018 to kill the exuberance? A lot. Regulators started paying much closer attention, and in the process revealed fraud, market manipulation, and shoddy business practices at cryptocurrency exchanges. Blockchain-powered decentralized applications struggled to get off the ground and investors realized they had got ahead of themselves. Prices began to fall, and then just kept falling. Arvind Narayanan, a computer science professor at Princeton, argued in a widely-shared twitter thread last week that in 2018 "the blockchain/decentralization story fell apart" due to "mistaken assumptions."
Whatever the reason, crypto winter is here. The evolution of blockchain technology isn't frozen, though. It just won't proceed in 2019 with the same celebrity that it did in 2017 and 2018. My hypothesis is that in the new year, the technology will start to become mundane, as big financial institutions get more involved with digital assets, legal technology companies start using smart contracts, and central banks get more serious about digital currencies. Before the industry can revolutionize finance, it must create products that are relevant, easy-to-use, and even boring to regular consumers. When it comes to finance, boring is good.
Bitcoin, cash, and freedom. Alex Gladstein, chief strategy officer at the Human Rights Foundation, a nonprofit focused on improving human rights in closed societies, makes a decently convincing case in Time that Bitcoin "can be a valuable financial tool as a censorship-resistant medium of exchange" for people living under authoritarian governments. In Venezuela, for example, it can be an alternative store of value to the bolivar, which has seen crippling inflation. Gladstein contends it can also be an "escape valve" for people in Zimbabwe, which is also dealing with inflation, China ("Xi Jinping can track all of your transactions on Alipay and WePay, but he cannot orchestrate mass surveillance on all Bitcoin payments"), and Russia ("Putin can target an NGO and freeze its bank account, but he can't freeze its Bitcoin wallet").
As Gladstein acknowledges, Bitcoin is just a tool. New technology on its own won't defeat authoritarianism. But his central point is particularly urgent because fewer people around the world are using cash. To account for that, many countries are considering rolling out their own digital currencies, and authoritarian regimes will likely try to use the technology for financial surveillance and censorship. Cash is still one of the best ways to exercise free speech, writes Gladstein. "It's essential that we explore electronic money that can preserve the peer-to-peer quality of cash for future generation."
Stablecoins: Designing a Price-Stable Cryptocurrency
Haseeb Qureshi, partner at one of the leading cryptocurrency hedge funds, MetaStable Capital, will join us on stage at Business of Blockchain to discuss Stablecoins, a price-stable cryptocurrency. Join us at Business of Blockchain and purchase your ticket today.
Loose Change
Fill your pockets with these newsy tidbits.
- Bakkt, the forthcoming digital asset exchange owned by the same company as the New York Stock Exchange, has once again delayed the launch of its first product: a Bitcoin futures contract. But it has raised $182.5 million from investors. (CoinDesk)
- Chinese Bitcoin mining chip maker Bitmain has denied rumors that it plans to lay off half of its staff, but confirmed that the company is planning layoffs. (South China Morning Post)
- Iran has criminalized the use of Telegram's forthcoming cryptocurrency. (Finance Magnates)
- Meanwhile, US lawmakers have introduced legislation that would impose sanctions on people who knowingly help Iran develop a state-backed digital currency. (CoinDesk)
- Major Japanese banking group Mizuho Financial Group plans to launch a digital currency, formerly called J-coin, in March. (Nikkei Asian Review$)
- The official Fortnite merchandise store now accepts the privacy-focused cryptocurrency Monero. (The Block)
